Library / Technical Accounting Manual: IFRS, IAS and Ind AS Equivalents

IAS 10 - Events After the Reporting Period

Indian equivalent: Ind AS 10 - Events After the Reporting Period

Objective and scope

IAS 10 deals with things that happen between the reporting date and the date the accounts are approved for issue, and decides whether each event should change the numbers (adjusting) or merely be disclosed (non-adjusting).

Core principle

The reporting date draws a line, but the accounts aren't finalised for weeks. IAS 10 asks one question about each later event: did it give evidence of a condition that already existed at the reporting date? If yes → adjust the figures. If it's a new condition that arose after → just disclose it.

Defined terms and technical terminology

Term	Technical meaning
Reporting period	The period the financial statements cover, ending on the reporting date.
Adjusting event	An event giving evidence of conditions that existed at the reporting date - you change the amounts.
Non-adjusting event	An event reflecting conditions that arose after the reporting date - you disclose but do not change amounts.
Date of approval / authorisation for issue	The date the board approves the statements for release - the cut-off for IAS 10.

Application and worked illustrations

The adjusting vs non-adjusting test

An adjusting event confirms something that was already true at the reporting date. Examples: a customer who owed money at year-end goes bankrupt shortly after (the debt was probably already bad → adjust the receivable); settlement of a court case that confirms an obligation existed at year-end; discovery of fraud or error; evidence that inventory's NRV at year-end was lower than thought. A non-adjusting event is a new condition arising after the date: a fire destroying a factory in the new year, a major share issue, a business acquisition, or a sharp fall in investment values after year-end - these are disclosed if material, but the year-end numbers stand.

Worked example 1 - adjusting

At 31 March a company shows a ₹3,00,000 receivable from Customer X. On 20 April, before the accounts are approved, Customer X is declared insolvent and will pay nothing. The insolvency reflects a condition (X's poor financial state) that existed at 31 March, so it is an adjusting event: the company writes the receivable down to zero in the 31 March accounts.

Worked example 2 - non-adjusting

On 10 May, a flood destroys the company's main warehouse. The flood is a new event - nothing was wrong at 31 March. It is a non-adjusting event: the 31 March figures are unchanged, but if material the company discloses the nature and estimated financial effect in the notes so readers aren't misled.

Dividends and going concern - two special rules

Dividends declared after the reporting date are non-adjusting - you cannot show them as a liability at year-end (there was no obligation then), only disclose them. But going concern is special: if events after the date indicate the entity is no longer a going concern, the accounts must be redrawn on a break-up basis - this overrides the normal adjusting/non-adjusting logic.

Common mistake: recognising a proposed/declared dividend as a year-end liability. Post-date dividends are non-adjusting - disclose only.

IND AS LINK

Ind AS 10 matches IAS 10. Indian companies must also reconcile this with the Companies Act treatment of proposed dividends (which are disclosed, not provided).

Further worked illustrations

Extra numeric example - inventory NRV confirmed after year-end

At 31 March, a company values stock at cost ₹5,00,000. On 15 April, before the accounts are approved, it sells that same stock for only ₹3,80,000. The sale confirms that the NRV at 31 March was below cost - an adjusting event. The company writes the 31 March inventory down to ₹3,80,000, recognising a ₹1,20,000 loss in the year just ended, not in April.

INDIAN REGULATORY CONTEXT

Under the Companies Act and Ind AS 10, a dividend proposed by the board after 31 March is not shown as a liability at 31 March - it is only disclosed. This was a real change from old Indian GAAP, where proposed dividends were provided for. Now they hit equity only when actually approved by shareholders in the following year.

TECHNICAL EDGE CASE

A lawsuit was ongoing at 31 March. On 10 May the court rules the company must pay ₹20,00,000. If the obligation arose from events on or before 31 March, the ruling is an adjusting event - book the ₹20 lakh provision in the year-end accounts. But if the ruling relates to an incident that happened in April (after year-end), it's non-adjusting - disclose only. The date of the underlying cause, not the date of the verdict, decides it.